Old Second Bancorp defaults on $75.5 million credit facility covenants

By Caroline Salls

Pittsburgh, July 31 - Old Second Bancorp, Inc. is in default on its $75.5 million credit facility from Bank of America, NA because the company is not in compliance with two loan covenants, according to an 8-K filed with the Securities and Exchange Commission.

Specifically, the company said it is not in compliance with a covenant that requires its subsidiary Old Second National Bank to maintain the ratio of its non-performing loans to the company's tier 1 capital to no more than 25% and a covenant that requires the bank to maintain a 0.66% return on average total assets.

According to the 8-K, the non-performing loan ratio was 61.71% as of June 30, and the return on average total assets was 1.79%.

If the default is not cured within a 30-day grace period, Bank of America will not extend any additional credit to the company or make additional disbursements, the filing said.

However, Old Second said the lender is not currently exercising any of its default-related rights, although it reserved its right to do so.

The company said it is in talks with the lender regarding a possible resolution, including a change in the covenants.

Old Second is an Aurora, Ill., bank holding company.

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